The EU ETS phase IV reform: implications for system functioning and for the carbon price signal

The European Commission launched the revision process for phase IV of the EU ETS in 2015, at a moment when the carbon price generated by the system was at a relative low, compared to previous levels and expectations. The final agreement on the revision package, adopted in early 2018, defines the EU ETS rules for the next decade. This paper aims to look at what the current outlook for the EU ETS in phase IV is. It will do so by examining the history and functioning of the EU ETS to date, by outlining the main elements of the phase IV reform, as proposed by the European Commission and as subsequently amended in the course of the legislative process, and their effects on the system. The paper will end by offering an outlook on the future of the EU ETS.

By: Stefano De Clara

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